IIFL Wealth reported a net income of Rs 384 crore on a fee income of around Rs 1,060 crore in the year to March 2019 when it closed the fiscal with an AUM of Rs 1,69,312 crore.
As part of its strategy to exit non-core businesses, L&T Finance is selling its wealth management arm to IIFL Group for around Rs 250 crore and the deal is set to be inked early next week, say three people aware of the development. Once concluded, this will be the fourth acquisition by IIFL Wealth, in which General Atlantic holds 21.8 per cent, in the past three years after the Chennai-based Wealth Advisors in October 2018, Ashburton India Equity Opportunities Fund in December 2017 and Bengaluru-based Altiore Advisors in 2016.
With over 10,000 clients, IIFL Wealth is the third largest player with an asset under management (AUM) of close to Rs 1.7 trillion, or around USD 24.5 billion, in the around USD 170-billion-strong domestic wealth management business, that is dominated by Kotak Wealth with an AUM of around USD 36 billion, followed by ICICI at USD 27 billion, according to industry estimates.
IIFL Wealth reported a net income of Rs 384 crore on a fee income of around Rs 1,060 crore in the year to March 2019 when it closed the fiscal with an AUM of Rs 1,69,312 crore. L&T Wealth has an asset under management of Rs 25,600 crore as of June and employs around 100 people. The company entered the wealth management segment in 2012 by roping in the Indian team of the Swiss private bank EFG.
“IIFL Wealth is set to snap up L&T Financials’ wealth management business for close to Rs 250 crore. The negotiations got delayed over valuation, as L&T was demanding higher valuation at over Rs 300 crore,” two people aware of the deal told PTI Friday. Another person confirming the deal said, “a formal announcement is expected early as early as in the first half of next week.”
Normally, the valuation in wealth management deals is around 1 per cent or thereabout of the AUM. The sources, however, did not say whether IIFL will absorb the employees of Larsen Wealth who number around 100. The deal will be inked between India Infoline Finance Wealth and Asset Management and the wealth management unit of L&T Financial Services.
Both the companies refused to confirm the deal. In an email Larsen Finance said, “as a policy we don’t comment on market speculation”, while an email sent to the IILF spokesperson did not elicit a response. The move by the Nirmal Jain-promoted group, which is majority owned by the Canadian NRI Prem Watsa’s Farifax Holdings, will help it close the gap with the segment leader Kotak, say industry observers.
IIFL Wealth has been growing through organic route and had acquired Wealth Advisors India, a Chennai-based firm, for a Rs 235 crore in October 2018. In December 2017, it had acquired Ashburton India Equity Opportunities Fund for an undisclosed amount, and in the previous year it had also bought Altiore Advisors based in Bengaluru, helping it grow the AUM.
One of the sources said for L&T Finance, the deal is good as it has been trying to pare non-core businesses to focus on its core areas of consumer and infra lending. There are also rumours that Larsen Finance is looking to exit mutual fund business. In the June quarter earnings, Larsen Finance had said it was looking to focus on core businesses likes rural lending, housing finance and infra finance, and may enter consumer loans. It can be noted that NBFCs are passing through a difficult situation following the bankruptcy of IL&FS last September which led to a severe liquidity crisis from which the industry is yet to recover.
IIFL Wealth, in which General Atlantic owns 21.8 per cent, manages an AUM of Rs 1,69,312 crore from 10,000 plus high networth families in the country and abroad and employs around 1,000. It can be noted that many wealth managers have been hit by a Sebi crackdown on the fee which asset managers pay to wealth managers, distributors and investment advisors. After capping mutual funds distribution fee in April, Sebi is tightening the fee of portfolio management services as well.
Late last month, WGC Wealth, formerly known as Validus Wealth from Wadhawan Global Capital, the holding arm of the crippled mortgage lender DHFL, was sold to LGT, a private bank owned by the royal family of the Liechtenstein.